Profile: Venessa Miemis on Why the Future of Money Matters

by Julie Anixter

One of the best things about the blogosphere is bumping into original thinkers like Venessa Miemis. She’s working on a couple of projects that merit attention of innovation practitioners — and especially those who are working to create new ways to think about financial and social transactions and define value. She’s recently written on the why the future of money matters and asks the provocative question — is the current system obsolete?

Like Miemis I too was struck by New York Mayor Bloomberg’s statement last week that unemployment could “turn New York City into Egypt.” We find her here in a recent post preparing for a ‘future of money’ talk for SIBOS in Toronto where she has the chutzpah to “paint a picture for the bankers about where the future may be heading.”

If necessity is the mother of invention then the world’s current economic crisis will stimulate and give rise to new forms of exchange, new economic models, new constructs for jobs, employment and economic survival. The formal innovation process require stimulus as well. If I were working in financial services right now, and I’m not, I’d be paying attention to Venessa. I would consider inviting her — as an outlier — to work on projects or do the fireside chat. Here’s the article in full…

As I’m looking at this article, I’m also preparing my ‘future of money’ talk for SIBOS in Toronto next week, where I’ll have just a few minutes to paint a picture for the bankers about where the future may be heading.

I’ve been trying to think about how to frame it, because it’s bigger than just talking about banks being disintermediated due to mobile payment platforms and peer to peer technology. There’s a larger discussion to be had about the nature and design of currency itself, its inherent biases towards certain types of behavior, and its impact on living systems. There’s also a story about the human desire to redefine what wealth means and to be empowered to create local economies that are biased towards cooperation and abundance.

It would seem, based on many of the things I’ve been reading, that allowing a variety of parallel currency systems to emerge would help meet the needs of people in these rough economic times, provide jobs, and create options for how value is created and exchanged. I don’t imagine it to be a panacea for all our problems (the system’s way too complex for that), but I do find cause for evidence-based optimism. There are some interesting historical precedents of local currency solutions being highly effective, and some scary implications of what happens when you take away this ability for people to help themselves. Allow me to share a bit I’ve been reading in Bernard Lietaer’s book, The Future of Money:

First, he gives a nice description of the socio-political consequences of what he calls “the vicious circle of unemployment.”

(I love reading about feedback loops. So much of our thoughts and behaviors are based on the programming and conditioning of the space between our ears, and you can just look at how we’ve responded in the past to similar situations to get an idea of what’s going to happen in the future.)

6 Step Feedback Loop:

1. Unemployment creates a feeling of economic exclusion
2. Part of those touched express it through violence
3. Most ordinary people react to the violence with fear
4. Community breaks down, society becomes unstable, political polarization increases
5. Fewer investments take place, fewer things are bought
6. The investment climate deteriorates. More unemployment is created.

Repeat.

Lietear then gives examples of how we’ve seen this cycle over and over throughout history, and what people do about it. Since there is really no shortage of work to be done, and no shortage of people willing and capable of doing the work, the issue is that there’s just no money to incentivize people to do it. So, how about changing the monetary framework?

It’s been shown to work, time and again. Here’s a story about the German ‘Wara’ system:

As a response to the hyperinflation period in Germany in the 1920s, a monetary experiment took place in the small town of Swanenkirchen. A coal mine owner, faced with the closing of the mine, created a new currency called Wara, which was backed by the coal inventory. A monthly demurrage tax was implemented, which disincentivizes hoarding and keeps money circulating within the community. The coal mine workers agreed to accept 90% of their pay in Wara, and other merchants in town agreed to accept Wara as payment for goods and services.

The currency worked so well that it began spreading until over 2,000 corporations in Germany were using it. The central bank perceived a threat, and in October 1931 the Ministry of Finance decreed the Wara illegal. Consequently, the coal mine shut down, unemployment went up again, and social unrest increased.

Broadly, people were prohibited from using the solutions they had created to help themselves, and so the only alternative was to seek a savior or a strong centralized solution. [one could argue this created favorable conditions for Adolf Hitler]

There’s a nice graph in the book showing the direct correlation between the level of unemployment and the percentage of seats captured by National-Socialism in Germany in the elections between 1924 and 1933, highlighting step #4 in the above loop of unemployment and political extremism.